What do you think?
Rate this book
What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time
Now, for the first time, investors can cut through the hype and see for themselves what works and what doesn't on Wall Street. James O'Shaughnessy, author of the highly-acclaimed Invest Like the Best, analyzes 30 years worth of CompuStat stock market data to show how the 15 most popular investment strategies have actually performed over time. With What Works on Wall Street, investors of all stripes-from the most conservative to the most aggressive-will finally have the facts to pick the best strategies for meeting their investment objectives.
352 pages, Hardcover
First published August 1, 1996
187 people are currently reading
3050 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 30 of 46 reviews
September 7, 2015
Disclaimer: I did not read the whole thing.
The problem with this book is that the author created a mutual fund afterwards that tanked really badly. It is also ridiculously vague and not systematic. People should read William J. O'Neil's How to Make Money in Stocks, which has won awards for being a good investment strategy.
The problem with this book is that the author created a mutual fund afterwards that tanked really badly. It is also ridiculously vague and not systematic. People should read William J. O'Neil's How to Make Money in Stocks, which has won awards for being a good investment strategy.
March 10, 2018
What Works on Wall Street
by James P. O'Shaughnessy
edition 4
2012
Revisited March 8 2018
This is a must read for anyone who wants to beat the market....if you want to tag along, use S&P500 Index fund....
This may be the system to beat all systems?
Page 5: Indexing to the S&P500 works because it sidesteps flawed decision making and automates the simple strategy of buying the big stocks (that make up index)
Page 8: Disciple is key
Page 40: We cannot escape our minds…but do not believe everything that you think!
44: It is different this time…does not add up when it comes to investing….and in business it works if you can show that people will pay for it!
61: Order and simplification are the first steps toward the mastery of a subject ~ Thomas Mann
103: Follow the course that is opposite to custom and you will almost always do well ~ Jean Jacques Rousseau – For the rebel or contrarian in you!
1. Chapter 5: Ranking stocks by market capitalization: Size matters
a. Investable companies start at 200Million
2. Chapter 6: Price to earnings ratios: separating the winners from the losers
a. High PEs are dangerous – page 93
b.
What a classic work!
• Wait for the wisest of all counselors, time – Pericles
Combine that with Einstein on compound interest
Albert Einstein:
'Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.'
Compound interest is the most powerful force in the universe
Asked once what the greatest invention of all times was, Albert Einstein is said to have replied, ''compound interest.'' His playful sense of humour and other aspects of his personality -as well as his genius - form the subject of a bus tour Sunday to the Institute for Advanced Study at Princeton, N.J., where the physicist worked during the last 20 years of his life. [...]
OK...these are likely unverified quotes...
But sources do say that the Canadian business mogul (founder of the Seagram's empire) Samuel Bronfman did say that the greatest invention of all time was 'compound interest'
• Good intelligence is nine-tenths of any battle – Napoleon
Chapter 3: The persistence of irrationality: How common mistakes create tremendous opportunity
Chapter 5: Ranking stocks by market capitalization: Size matters
Investable companies start at 200Million
Chapter 6: Price to earnings ratios: separating the winners from the losers
• When it comes to making money, everyone is of the same religion – Voltaire
Chapter 7: EBITDA to enterprise value
Chapter 10: Price to book value ratios: A long term winner with long periods of underperformance
• 178: Stocks with high price to book ratios are poor performers
Chapter 11: Dividend yields: buying an income
Chapter 12: Buyback yield
• 223: When studying the most effective way to return cash to shareholders, repurchasing shares in the open market provides higher returns than paying cash in the form of dividends.
Chapter 13: Shareholder yield
Chapter 14: Accounting ratios
300: Accounting variables matter
• how they account for accruals
• how quickly depreciate capital expenses
• additions to debt
Chapter 15 Combining value factors into a single composite factor
• 327: investors would be well served to consider how stocks score on all value factors and not just one or two.
Chapter 16: The value of value factors
• 356: You'll also need to think about the long term results of our strategies after bear markets like those of 2000-2003 and 2007-2009. The back to back sever ear markets of the last decade soured many people on ever investing in the stock market....
Chapter 17: One year per share percentage changes: Do high earnings gains mean high performance?
• 375: Buying stocks simply because they had great earnings gains is a losing proposition
Chapter 18: Profit margins: do investors profit from corporate profits?
• 387: History shows that using high profit margins as the sole determinant for buying a stock leads to disappointing results.
Chapter 19: Return on equity
• 404: ROE is not a great factor to use on its own....
Chapter 20: Relative price strength: winners continue to win
Page 443:
• Avoid biggest losers
• only time to buy from this group (bottom 10%) is in the first year following a severe bear market
• for now, we see that relative strength is among the only pure growth factors that actually beats the market consistently and by a wide margin
Chapter 21: Using multifactor models to improve performance
• 470: Investors are best served by buying stocks that have jumped a series of hurdles rather than just one
We've seen that by combining single factors like price momentum and shareholder yield (SY) we can generate far better returns than using either individually and we can lower our risk at the same time.
• 225: SY = stock's dividends yield + buyback yield
Chapter 22: Dissecting the market leaders universe: the ratios that add the most value
• 473: Now use a minimum market capitalization of 50M
• 484: With the market leaders universe we see exactly the same thing we see with the broader All and Large Stocks universe – focusing on the most expensive popular stocks delivers the worst overall returns, while concentrating on the cheaper stocks delivers the best returns...with consistency
Chapter 23: Dissecting the small stocks universe: the ratios that add the most value
• 485: Small stocks universe...greater than 200M but less than the CRSP (center for research on security pricing) average
• 499: Over past 44 years the best performing small-cap strategy performed 9X as well as the Small Stock universe...and many of the commonly successful strategies like
• buying stocks with low PE
• Low price to cash flow
• low price to sales ratios
◦ significantly enhanced the returns of the a small capitalization strategy
RED FLAG: Even the best strategies suffered declines of 50% or more, a reality all small-cap investors must face
Volatility!!!
Chapter 24: Sector Analysis
• 501: Quintile; since 1967
10 economic sectors
1. consumer discretionary – 430
1. 507: enterprise value to free cash flow; Value composite. 2, 3 or 6 month price appreciation
2. consumer staples – 141
1. Value factors, with shareholder yield topping list
2. 511: highest annual compound return of all 10 economic sectors which can be improved by concentrating on stocks with the highest dividend yield, shareholder yield or best scores from our composited value
3. energy – 220
1. 515: investing using value factor 3 is a clear winner
2. high volatility
4. financials – 408
1. 516 at one point 40% of S&P 500, now just 16%
2. 519: investors wanting good returns with lower volatility should consider buying those financial stocks with the highest buyback yield
3. avoid bottom quintile
5. Health care – 323
1. 523: concentrate on those stocks with the lowest price to cash flow or highest scores on the composited value factors
6. Industrials – 424
1. 527: should buy those industrial stocks with the highest scores on composited factor 2
7. Information technology – 501
1. 528: ironic that one of the sexiest sectors is the one that offers investors the lowest average annual compound returns
2. 531: the most treacherous of the 10 sectors
3. Offered lowest average annual returns along with huge maximum declines...
8. Materials – 240
1. focus on best quintile from composited value factors 2 or 3
9. Telecommunications services – 96
1. 540: offers disciplined investors an excellent return it they are willing to stick with those stocks with the best overall scores on the carious composited value factors
10. utilities – 114
1. 543: Most conservative of the 10 sectors
2. investors can boost returns by focusing on the composited value factors
544: the three composited value factors add value, regardless of the volatility of the sector itself
Chapter 25: Searching for the ideal growth strategy
567: One of the best ways to use price momentum is to marry it to a value constraint.
In earlier editions of this book, the price-to-sales was the value filter, but research revealed, that significant improvements that the composted value factors offers to both overall returns and volatility
We have also discovered that 6 month price appreciation is more effective final momentum filter than 12 month price appreciation
Chapter 26: Searching for the ideal value stock investment strategy
578: ...think that you can improve your results by adding value components to growth strategies and growth components to value strategies
Depending on your goals for the vale portion of your portfolio these two strategies are both attractive solid performers
Chapter 27: Uniting the best from growth and value
• 579: Uniting the best from growth and value factors to produce a portfolio we will call trending value
• 591: ...a powerful way to get the best returns from the stock market
Chapter 28: Ranking the strategies
645: Willing to take market risk: Trending value strategy that combines the best of value and the best of growth
• selects stocks from the All Stock universe in deciles 1 of Value Composite 2
• Then buys the stocks with the best 6 month price appreciation
Very conservative:
• combined portfolio that draws from the consumer staples and utilities sectors and then buys the 25 stocks from consumer staples with the highest shareholder yield and 25 stocks from the utilities sector with the best scores on Value Composite 2
Finally at the very lest you can now see which types of stocks to avoid. If you're tempted to take a chance on a glamour stock trading at high multiples - don't!
Chapter 29: Getting the most of your equity investments
647: Taoist concept of Wu Wei: “to act without action”
Don't try to put square pegs in round holes
Understand the essence of a circle and use it as nature intended
Wittgenstein's maxim: “Don't look for the meaning: look for the use!”
648: The old man in turbulent waters who survived: “I began to learn while very young, and grew up practicing it. Now, I am certain of success. I go down with the water and come up with the water. I follow it and forget myself. The only reason I survive is because I don't struggle against the water's superior power.”
The market is like the water.
• 649: Suggests doing well in the market you must:
• Always use strategies
• Ignore the short term
• Use only strategies proven over the long term
• Dig deep
• Invest consistently
• Always bet with the base rate
• never use the riskiest strategies
◦ concentrate on those with the highest risk-adjusted returns
• Always use more than one strategy
• Use multifactor models
• Insist on consistency
• The stock market is not random
Quotes:
• Wait for the wisest of all counsellors, time – Pericles
• Follow the course that is opposite to custom and you will almost always do well – Jean-Jacques Rousseau
• If you do not change direction, you may end up where you are heading – LaoTzu
• We can easily represent things as we wish them to be. - Aesop
• October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. ~ Mark Twain
• Vision is the art of seeing what is invisible to others – Jonathan Swift
• Better to be wise by the misfortunes of others than by your own. - Aesop
• Remind people that profit is the difference between revenue and expense. This makes you look smart ~ Scott Adams
• The rational man – like the Loch Ness monster – is sighted often, but photographed rarely – David Dreman
• Discovery consists in seeing what everybody has seen and thinking what nobody has thought – Albert Szent-Gyorgyi
• It ain't so much what people know that hurts as what they know that ain't so – Artemus Ward
◦ "It ain’t so much the things we don’t know that get us into trouble, it’s the things we do know that just ain’t so." Quoted in the article "Knowledge in the U.S." by Robert McHenry, Chicago Tribune 3/21/05)
• I'd rather see folks doubt what's true than accept what isn't – Frank A Clark
• It may be that the race is not always to the swift, nor the battle to the strong – but that's the way to bet – Damon Runyon
◦ Don't fight the tape
◦ Make the trend your friend
◦ Cut your losses and let your winners run
▪ These Wall Street maxims all mean the same thing – bet on price momentum.
• It is not who is right, but what is right, that is important – Thomas Huxley
• Numbers serve to discipline rhetoric. Without them it is too easy to follow flights of fancy, to ignore the world as it is and to remould it near the heart's desire ~ Ralph Waldo Emerson
• The degree of one's emotions varies inversely with one's knowledge of the facts – the less you know, the hotter you get. - Bertrand Russell
• All truths are easy to understand once they are discovered; the point is to discover them - Galileo Galilei
• Facts do not cease to exist because they are ignored – Aldous Huxley
• The best way to manage anything is by making use of its own nature ~ Lao Tzu
• What we learn from history is that we do not learn from history ~ Bengamin Disraeli
• To think is easy. To act is difficult. To act as one thinks is the most difficult of all. - Johann Wolfgang von Goethe
by James P. O'Shaughnessy
edition 4
2012
Revisited March 8 2018
This is a must read for anyone who wants to beat the market....if you want to tag along, use S&P500 Index fund....
This may be the system to beat all systems?
Page 5: Indexing to the S&P500 works because it sidesteps flawed decision making and automates the simple strategy of buying the big stocks (that make up index)
Page 8: Disciple is key
Page 40: We cannot escape our minds…but do not believe everything that you think!
44: It is different this time…does not add up when it comes to investing….and in business it works if you can show that people will pay for it!
61: Order and simplification are the first steps toward the mastery of a subject ~ Thomas Mann
103: Follow the course that is opposite to custom and you will almost always do well ~ Jean Jacques Rousseau – For the rebel or contrarian in you!
1. Chapter 5: Ranking stocks by market capitalization: Size matters
a. Investable companies start at 200Million
2. Chapter 6: Price to earnings ratios: separating the winners from the losers
a. High PEs are dangerous – page 93
b.
What a classic work!
• Wait for the wisest of all counselors, time – Pericles
Combine that with Einstein on compound interest
Albert Einstein:
'Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.'
Compound interest is the most powerful force in the universe
Asked once what the greatest invention of all times was, Albert Einstein is said to have replied, ''compound interest.'' His playful sense of humour and other aspects of his personality -as well as his genius - form the subject of a bus tour Sunday to the Institute for Advanced Study at Princeton, N.J., where the physicist worked during the last 20 years of his life. [...]
OK...these are likely unverified quotes...
But sources do say that the Canadian business mogul (founder of the Seagram's empire) Samuel Bronfman did say that the greatest invention of all time was 'compound interest'
• Good intelligence is nine-tenths of any battle – Napoleon
Chapter 3: The persistence of irrationality: How common mistakes create tremendous opportunity
Chapter 5: Ranking stocks by market capitalization: Size matters
Investable companies start at 200Million
Chapter 6: Price to earnings ratios: separating the winners from the losers
• When it comes to making money, everyone is of the same religion – Voltaire
Chapter 7: EBITDA to enterprise value
Chapter 10: Price to book value ratios: A long term winner with long periods of underperformance
• 178: Stocks with high price to book ratios are poor performers
Chapter 11: Dividend yields: buying an income
Chapter 12: Buyback yield
• 223: When studying the most effective way to return cash to shareholders, repurchasing shares in the open market provides higher returns than paying cash in the form of dividends.
Chapter 13: Shareholder yield
Chapter 14: Accounting ratios
300: Accounting variables matter
• how they account for accruals
• how quickly depreciate capital expenses
• additions to debt
Chapter 15 Combining value factors into a single composite factor
• 327: investors would be well served to consider how stocks score on all value factors and not just one or two.
Chapter 16: The value of value factors
• 356: You'll also need to think about the long term results of our strategies after bear markets like those of 2000-2003 and 2007-2009. The back to back sever ear markets of the last decade soured many people on ever investing in the stock market....
Chapter 17: One year per share percentage changes: Do high earnings gains mean high performance?
• 375: Buying stocks simply because they had great earnings gains is a losing proposition
Chapter 18: Profit margins: do investors profit from corporate profits?
• 387: History shows that using high profit margins as the sole determinant for buying a stock leads to disappointing results.
Chapter 19: Return on equity
• 404: ROE is not a great factor to use on its own....
Chapter 20: Relative price strength: winners continue to win
Page 443:
• Avoid biggest losers
• only time to buy from this group (bottom 10%) is in the first year following a severe bear market
• for now, we see that relative strength is among the only pure growth factors that actually beats the market consistently and by a wide margin
Chapter 21: Using multifactor models to improve performance
• 470: Investors are best served by buying stocks that have jumped a series of hurdles rather than just one
We've seen that by combining single factors like price momentum and shareholder yield (SY) we can generate far better returns than using either individually and we can lower our risk at the same time.
• 225: SY = stock's dividends yield + buyback yield
Chapter 22: Dissecting the market leaders universe: the ratios that add the most value
• 473: Now use a minimum market capitalization of 50M
• 484: With the market leaders universe we see exactly the same thing we see with the broader All and Large Stocks universe – focusing on the most expensive popular stocks delivers the worst overall returns, while concentrating on the cheaper stocks delivers the best returns...with consistency
Chapter 23: Dissecting the small stocks universe: the ratios that add the most value
• 485: Small stocks universe...greater than 200M but less than the CRSP (center for research on security pricing) average
• 499: Over past 44 years the best performing small-cap strategy performed 9X as well as the Small Stock universe...and many of the commonly successful strategies like
• buying stocks with low PE
• Low price to cash flow
• low price to sales ratios
◦ significantly enhanced the returns of the a small capitalization strategy
RED FLAG: Even the best strategies suffered declines of 50% or more, a reality all small-cap investors must face
Volatility!!!
Chapter 24: Sector Analysis
• 501: Quintile; since 1967
10 economic sectors
1. consumer discretionary – 430
1. 507: enterprise value to free cash flow; Value composite. 2, 3 or 6 month price appreciation
2. consumer staples – 141
1. Value factors, with shareholder yield topping list
2. 511: highest annual compound return of all 10 economic sectors which can be improved by concentrating on stocks with the highest dividend yield, shareholder yield or best scores from our composited value
3. energy – 220
1. 515: investing using value factor 3 is a clear winner
2. high volatility
4. financials – 408
1. 516 at one point 40% of S&P 500, now just 16%
2. 519: investors wanting good returns with lower volatility should consider buying those financial stocks with the highest buyback yield
3. avoid bottom quintile
5. Health care – 323
1. 523: concentrate on those stocks with the lowest price to cash flow or highest scores on the composited value factors
6. Industrials – 424
1. 527: should buy those industrial stocks with the highest scores on composited factor 2
7. Information technology – 501
1. 528: ironic that one of the sexiest sectors is the one that offers investors the lowest average annual compound returns
2. 531: the most treacherous of the 10 sectors
3. Offered lowest average annual returns along with huge maximum declines...
8. Materials – 240
1. focus on best quintile from composited value factors 2 or 3
9. Telecommunications services – 96
1. 540: offers disciplined investors an excellent return it they are willing to stick with those stocks with the best overall scores on the carious composited value factors
10. utilities – 114
1. 543: Most conservative of the 10 sectors
2. investors can boost returns by focusing on the composited value factors
544: the three composited value factors add value, regardless of the volatility of the sector itself
Chapter 25: Searching for the ideal growth strategy
567: One of the best ways to use price momentum is to marry it to a value constraint.
In earlier editions of this book, the price-to-sales was the value filter, but research revealed, that significant improvements that the composted value factors offers to both overall returns and volatility
We have also discovered that 6 month price appreciation is more effective final momentum filter than 12 month price appreciation
Chapter 26: Searching for the ideal value stock investment strategy
578: ...think that you can improve your results by adding value components to growth strategies and growth components to value strategies
Depending on your goals for the vale portion of your portfolio these two strategies are both attractive solid performers
Chapter 27: Uniting the best from growth and value
• 579: Uniting the best from growth and value factors to produce a portfolio we will call trending value
• 591: ...a powerful way to get the best returns from the stock market
Chapter 28: Ranking the strategies
645: Willing to take market risk: Trending value strategy that combines the best of value and the best of growth
• selects stocks from the All Stock universe in deciles 1 of Value Composite 2
• Then buys the stocks with the best 6 month price appreciation
Very conservative:
• combined portfolio that draws from the consumer staples and utilities sectors and then buys the 25 stocks from consumer staples with the highest shareholder yield and 25 stocks from the utilities sector with the best scores on Value Composite 2
Finally at the very lest you can now see which types of stocks to avoid. If you're tempted to take a chance on a glamour stock trading at high multiples - don't!
Chapter 29: Getting the most of your equity investments
647: Taoist concept of Wu Wei: “to act without action”
Don't try to put square pegs in round holes
Understand the essence of a circle and use it as nature intended
Wittgenstein's maxim: “Don't look for the meaning: look for the use!”
648: The old man in turbulent waters who survived: “I began to learn while very young, and grew up practicing it. Now, I am certain of success. I go down with the water and come up with the water. I follow it and forget myself. The only reason I survive is because I don't struggle against the water's superior power.”
The market is like the water.
• 649: Suggests doing well in the market you must:
• Always use strategies
• Ignore the short term
• Use only strategies proven over the long term
• Dig deep
• Invest consistently
• Always bet with the base rate
• never use the riskiest strategies
◦ concentrate on those with the highest risk-adjusted returns
• Always use more than one strategy
• Use multifactor models
• Insist on consistency
• The stock market is not random
Quotes:
• Wait for the wisest of all counsellors, time – Pericles
• Follow the course that is opposite to custom and you will almost always do well – Jean-Jacques Rousseau
• If you do not change direction, you may end up where you are heading – LaoTzu
• We can easily represent things as we wish them to be. - Aesop
• October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. ~ Mark Twain
• Vision is the art of seeing what is invisible to others – Jonathan Swift
• Better to be wise by the misfortunes of others than by your own. - Aesop
• Remind people that profit is the difference between revenue and expense. This makes you look smart ~ Scott Adams
• The rational man – like the Loch Ness monster – is sighted often, but photographed rarely – David Dreman
• Discovery consists in seeing what everybody has seen and thinking what nobody has thought – Albert Szent-Gyorgyi
• It ain't so much what people know that hurts as what they know that ain't so – Artemus Ward
◦ "It ain’t so much the things we don’t know that get us into trouble, it’s the things we do know that just ain’t so." Quoted in the article "Knowledge in the U.S." by Robert McHenry, Chicago Tribune 3/21/05)
• I'd rather see folks doubt what's true than accept what isn't – Frank A Clark
• It may be that the race is not always to the swift, nor the battle to the strong – but that's the way to bet – Damon Runyon
◦ Don't fight the tape
◦ Make the trend your friend
◦ Cut your losses and let your winners run
▪ These Wall Street maxims all mean the same thing – bet on price momentum.
• It is not who is right, but what is right, that is important – Thomas Huxley
• Numbers serve to discipline rhetoric. Without them it is too easy to follow flights of fancy, to ignore the world as it is and to remould it near the heart's desire ~ Ralph Waldo Emerson
• The degree of one's emotions varies inversely with one's knowledge of the facts – the less you know, the hotter you get. - Bertrand Russell
• All truths are easy to understand once they are discovered; the point is to discover them - Galileo Galilei
• Facts do not cease to exist because they are ignored – Aldous Huxley
• The best way to manage anything is by making use of its own nature ~ Lao Tzu
• What we learn from history is that we do not learn from history ~ Bengamin Disraeli
• To think is easy. To act is difficult. To act as one thinks is the most difficult of all. - Johann Wolfgang von Goethe
March 1, 2016
Great analysis of various strategies over the 1927-2009 and the 1965-2009 periods. Simple, clear explanation of the core factors (size, value, momentum), multifactor models, and how the risk-adjusted outperformance relates to CAPM. If I had one complaint its that its not very instructional about how-to implement any of the strategies (in terms of efficient execution, etc). But I guess its not a book that's typically read by beginners. Shrugs.
Read
June 13, 2015Joel Greenblatt recommended reading this book in his graduate special situation investing course.
James is a man with a hammer, and boy does he use it!
Quotes Graham and Dodd but half the book adjusts returns for volatility (he thinks volatility is risk).
Probably one of the most ironic investing books I've read! James sold his mutual funds at the height of the 2000 bubble when his strategies weren't working!
James is a man with a hammer, and boy does he use it!
Quotes Graham and Dodd but half the book adjusts returns for volatility (he thinks volatility is risk).
Probably one of the most ironic investing books I've read! James sold his mutual funds at the height of the 2000 bubble when his strategies weren't working!
January 17, 2016
Quant investing analysis.
October 4, 2024
A hidden treasure.
June 25, 2013
If you are a true investor with economic knowledge this book is terrific. There isn't really much writing. However the book is a compilation of all the possible investment strategies that one could think of using the stock market history going back before the depression, although most data is from the 1960's on. The data is presented in spreadsheet format with common text explaining the details that sort of repeats over and over. However the data is clear about what the winning strategies are. If you truly want to be a successful investor, this book is for you if you can understand it. Anyone who invests and has accounting, economic or business knowledge and who wants to be successful will recognize the importance of the book. If you don't have this knowledge, the book will be worth zero stars.
May 30, 2014
A serious book for a serious investor. The book gives an investor a strategy to invest . Backed by research and evidence over a number of years, investors will be guided by these data to form an opinion on their investment.
August 5, 2015
Pretty good reading if you are interested in investing. Not exactly a bible. Comes off like it is telling you the best method because it tells historical statistics but nobody can really document a perfect investing method just by looking at history. It soesn't allow for change.
January 26, 2012
The 4th edition of my book has lots of new information in it for stock market junkies.
May 10, 2015
A really good book if you're interested in the specifics of "what works" - get your spreadsheets out! This is about the math.
July 24, 2017
Mathematically tested methods for determining which stocks to pick.
January 5, 2019
Do not let the size of this book scare you. The information and data contained within had me wishing it would never end. Every investor needs this book in their collection!
September 27, 2021
The following are other critiques of this book on goodreads that I feel require response.
- vague not systematic
- Not instructional for implementation
- book is 90% charts depicting now readily available data
This tome IS thicker than the Bible. It IS boring. It is NOT a tutorial.
Most critiques are a mismatch of expectations. If you expect this to be either a tutorial or a thrill-ride you'll be let down.
If you go into this book knowing it's a thorough analysis in service of validating the hypothesis of certain factors giving an edge over the market you'll see it for what it is: insanely useful knowledge, for which the data presented is in a supporting, not lead, role.
- he thinks volatility is risk
This critique isn't really even fair, volatility as risk is a primary measure of risk in the industry because of sequence of returns and it's how companies like Morningstar compare funds. His use of volatility as the comparison risk measure is wholly justified.
There might be something to be said for his comparison's lack of mention of unsystematic risks but frankly it would be reflected in his volatility measures if it were it an issue.
- no one can document a perfect model by looking at history
A "perfect" model is never espoused in this book, this is a lie. Though historical data is used for back-testing, which is an industry norm.
- confident writing about shaky theories
His confidence is founded if you read the methodology by which he uses data to pretty definitively evidence the validity of those theories... I have to wonder what book this one read.
This is an excellent book that debunks the random walk theory and shows that, in fact, there has been a measure of correlation between a company's future stock price and their measures of performance/health relative to their current price. Why this is challenging to some I'll never understand.
- vague not systematic
- Not instructional for implementation
- book is 90% charts depicting now readily available data
This tome IS thicker than the Bible. It IS boring. It is NOT a tutorial.
Most critiques are a mismatch of expectations. If you expect this to be either a tutorial or a thrill-ride you'll be let down.
If you go into this book knowing it's a thorough analysis in service of validating the hypothesis of certain factors giving an edge over the market you'll see it for what it is: insanely useful knowledge, for which the data presented is in a supporting, not lead, role.
- he thinks volatility is risk
This critique isn't really even fair, volatility as risk is a primary measure of risk in the industry because of sequence of returns and it's how companies like Morningstar compare funds. His use of volatility as the comparison risk measure is wholly justified.
There might be something to be said for his comparison's lack of mention of unsystematic risks but frankly it would be reflected in his volatility measures if it were it an issue.
- no one can document a perfect model by looking at history
A "perfect" model is never espoused in this book, this is a lie. Though historical data is used for back-testing, which is an industry norm.
- confident writing about shaky theories
His confidence is founded if you read the methodology by which he uses data to pretty definitively evidence the validity of those theories... I have to wonder what book this one read.
This is an excellent book that debunks the random walk theory and shows that, in fact, there has been a measure of correlation between a company's future stock price and their measures of performance/health relative to their current price. Why this is challenging to some I'll never understand.
November 20, 2017
Already on the second page the author has repeated a whole paragraph. So this book continuous in the american tradition of being a bloated book with its over 600 pages. The book is filled with tables. I think the tables should be reduced. So many numbers are just not very readable. Show the data visually - to convey the message better.
The author goes through fundamental indicators like Price/Earnin, Price/Sales and so on. For each chapter I think it is enough to say something about the geometric mean, std, and sharp ration. As well as some info about the rolling 5 and 10 year return (really only 10 year return is interesting). And a histogram with the 10 - 10% interval of return. And some words about its correlation with the relevant indexes.
Having got through the first 15 chapters - where I learned about the most important fundamental indicators - the really interesting chapters starting. Looking at how to aggregate these fundamental indicators with each other and with technical indicators. This is where the book shines, and Im willing to look past all the bloated and repeating chapters.
As Terry has said - key take away is:
"1. Most investors underperform because they don't have a time-tested investment strategy.
2. Second reason is that even if they have, they fail to carry it through ups and downs, changing it at the exact time when they shouldn't."
What I would really like to see in a revision of this book is how we can perform the kind of analysis in todays market that the author has made in the historical dataset. E.g. how can I find the top 25 stocks in one of the multifactor strategies mentioned.
For those that dont have time for 600 pages of this - i recommend The Little Book That Still Beats the Market
The author goes through fundamental indicators like Price/Earnin, Price/Sales and so on. For each chapter I think it is enough to say something about the geometric mean, std, and sharp ration. As well as some info about the rolling 5 and 10 year return (really only 10 year return is interesting). And a histogram with the 10 - 10% interval of return. And some words about its correlation with the relevant indexes.
Having got through the first 15 chapters - where I learned about the most important fundamental indicators - the really interesting chapters starting. Looking at how to aggregate these fundamental indicators with each other and with technical indicators. This is where the book shines, and Im willing to look past all the bloated and repeating chapters.
As Terry has said - key take away is:
"1. Most investors underperform because they don't have a time-tested investment strategy.
2. Second reason is that even if they have, they fail to carry it through ups and downs, changing it at the exact time when they shouldn't."
What I would really like to see in a revision of this book is how we can perform the kind of analysis in todays market that the author has made in the historical dataset. E.g. how can I find the top 25 stocks in one of the multifactor strategies mentioned.
For those that dont have time for 600 pages of this - i recommend The Little Book That Still Beats the Market
January 23, 2022
I think it was Ken French that said “Price to anything works well”. What Works on Wall Street performs decile analysis on all kinds of financial multiples back to 1964 and 1927. By doing so, he provides very convincing data that we can use not just book value, but many other metrics, to get a sense for what outperforms.
Here is a list of value multiples that he finds works well:
Price to Earnings
EBITDA to Enterprise Value
Price to Cash Flow
Price to Sales
Price to Book
Shareholder Yield
He also convincingly shows that value composite consisting of multiple metrics works better than any one metric individually and recommends combining all of the above metrics into a value composite factor.
He also explores momentum. Although he shows that value metrics are generally better. Among momentum metrics he shows that stocks sorted by 6 month momentum perform best and that 12 month momentum also performs well.
He finally recommends a combined strategy he calls “Trending Value”, which starts with the stocks in the best decile of the value composite (combination of bullet point metrics above), but then chooses the best 25 or 50 from among these with the best 6 month momentum metric. The 50 stock portfolio has a Sharpe ratio of 0.90 from 1964-2009.
Yes, a theme throughout the book is that he recommends investing with concentration, only the top decile or top 25-50 stocks.
Here is a list of value multiples that he finds works well:
Price to Earnings
EBITDA to Enterprise Value
Price to Cash Flow
Price to Sales
Price to Book
Shareholder Yield
He also convincingly shows that value composite consisting of multiple metrics works better than any one metric individually and recommends combining all of the above metrics into a value composite factor.
He also explores momentum. Although he shows that value metrics are generally better. Among momentum metrics he shows that stocks sorted by 6 month momentum perform best and that 12 month momentum also performs well.
He finally recommends a combined strategy he calls “Trending Value”, which starts with the stocks in the best decile of the value composite (combination of bullet point metrics above), but then chooses the best 25 or 50 from among these with the best 6 month momentum metric. The 50 stock portfolio has a Sharpe ratio of 0.90 from 1964-2009.
Yes, a theme throughout the book is that he recommends investing with concentration, only the top decile or top 25-50 stocks.
February 9, 2022
The guy went through the trouble of backtesting some strategies. The audiobook format might not be the best way to read this book because you need to remember what numbers and percentages he is comparing to what and short term memory is limited. But you can grasp the gist of it and near the end is a good review of the points. Like mix growth and value so you get best of both worlds. Single factor is often not enough. Might be worth a reread with eyes not ears. I use the Falcon Method for investing and I was smiling because that is a multifactor value growth strategy and David clearly learned from this book as well. Overall decent but not very "entertaining". Interesting, but I wish it was actualized to cover the most recent decade or two.
February 4, 2024
In a nutshell, this book tells you to buy companies with a low price to sales ratio and positive momentum.
The book explores many of the world’s best known strategies, ranging from pice earnings ratios to momentum to price to sales ratios and as to see which kind of strategies would have worked in the past if you had followed using a compute- like strategy rearranging your portfolio just once a year.
For those who already know a little bit about finance, this is a very educational book and one which will help you improve your investment performance.
It is rare to find such a well researched book with so much valid and useful data
The book explores many of the world’s best known strategies, ranging from pice earnings ratios to momentum to price to sales ratios and as to see which kind of strategies would have worked in the past if you had followed using a compute- like strategy rearranging your portfolio just once a year.
For those who already know a little bit about finance, this is a very educational book and one which will help you improve your investment performance.
It is rare to find such a well researched book with so much valid and useful data
December 31, 2018
The most common, and most important question people ask when they start to learn about investing is, “how do I invest?”
The fact that this book exists is incredible; most money managers would try to keep their investment approach a secret! For whatever reason, James O’Shaughnessy decided to share these incredible strategies with everyone.
This book is great if you have a working knowledge of investments and valuation. However, you need access to a pretty sophisticated stock screener if you want to apply these strategies.
The fact that this book exists is incredible; most money managers would try to keep their investment approach a secret! For whatever reason, James O’Shaughnessy decided to share these incredible strategies with everyone.
This book is great if you have a working knowledge of investments and valuation. However, you need access to a pretty sophisticated stock screener if you want to apply these strategies.
December 15, 2020
This book is different from several other investment books. It has back tests and metrics for various factors, going back to about 50 years. The author has been meticulous in selecting the factors and organizing the chapters. Each chapter is the equivalent of a white paper or research paper with clear context, observations and conclusion. There are no "gut feelings", subjective opinions or unsubstantiated claims in the book. Highly recommended.
April 23, 2020
A book full with statistics like low Price to Sales combined with increased earning for small companies outperform the stock market index for the two decades of the analysis. The above is an imaginary strategy, but it is similar to the approach of the author who try to find simple measures (or a combination of them) to have good returns with not hugely drops of portfolio values.
March 4, 2024
Easiest way to ease into value investing without actually being a value investor. This gets you started.
So far this book has made me confident to invest most amount of money, and as a result, I made most money in $ from this. But there are better systems in terms of % returns however it is very hard to have the cojones to invest a lot of money in such systems.
So far this book has made me confident to invest most amount of money, and as a result, I made most money in $ from this. But there are better systems in terms of % returns however it is very hard to have the cojones to invest a lot of money in such systems.
February 3, 2018
This recent edition is a good update to the original. It benefits from hindsight and provides analysis and a little tinkering of previous strategies. It also gets a little defensive at the end with its critics.
September 30, 2021
all the information you could want
comprehensive. those that use this lightly will do well. those that use it deeply will do very well. those that absorb its teachings will likely do extremely well, abs know why.
comprehensive. those that use this lightly will do well. those that use it deeply will do very well. those that absorb its teachings will likely do extremely well, abs know why.
February 3, 2023
One quick read is good. Did lot of skimming. Strategies discussed in book makes lot of sense and works over long term. Blending value and growth strategies is definitely an odd-one-out strategy that made me rethink about passive investing.
June 14, 2023
Outstanding Book.
Takes a portfolio of All stocks and Large Stocks in the US markets and ranks performance based upon a series of financial rations including PE, Price to Sales, Price to Book and many others providing performance from 1929 to 2010.
Provides a recommendation as to what actually beats the market and holding a passive index fund
Well worth reading if stock market analysis interests you Recommended
Takes a portfolio of All stocks and Large Stocks in the US markets and ranks performance based upon a series of financial rations including PE, Price to Sales, Price to Book and many others providing performance from 1929 to 2010.
Provides a recommendation as to what actually beats the market and holding a passive index fund
Well worth reading if stock market analysis interests you Recommended
October 13, 2023
A comprehensive analysis regarding stock market and various strategies. Eventhough one may decide not use strategies in this book, at least it gives a broad vision to see which to avoid also. Not 5 stars because it sometimes is boring and repetitive.
March 21, 2017
confident writing about shaky theories.
June 19, 2018
Very interesting the study but I think that that's a pity that it doesn't go a bit deeper than that.
September 2, 2018
Use rules, and be long term
Displaying 1 - 30 of 46 reviews